While the much-anticipated year-end rally appears to be losing momentum, market volatility remains surprisingly compressed. With the VIX hovering at historic lows, I don’t see a significant drop as a warning, but rather a strategic “buy on the edge” opportunity. Broadcom (AVGO) fits this requirement perfectly. Between December 10th and 17th, the stock price plummeted 22%, the steepest decline since 2020. Since that capitulation, the stock has gradually regained its footing, making it an attractive entry for patient traders. To time this entry, I am analyzing three different technical signals. Custom MACD (5, 13, 5) We used tuned and fast MACD settings to spot momentum changes early. The bullish crossover occurred on December 23rd, providing a “heads up” signal well before the market as a whole recognized stabilization. The RSI (Relative Strength Index) momentum situation is improving. After avoiding oversold levels, the RSI found a bottom and has been trending upward since December 18, confirming that buying pressure is gradually returning. DMI Warnings However, the Directional Movement Index (DMI) suggests a degree of caution. The DI-line (representing bearish pressure) shows a slight upswing. I am approaching this trade a little more conservatively than usual, as this indicator has not yet given a complete “all clear” signal. If you’re interested in an emotionless trading system built on these principles, check out TradeWithMaya. CNBC readers receive a special 50% discount for three months. Trade Setup: AVGO 345-350 Bull Call Spread Despite the mixed signals from DMI, the risk-reward ratio here is too good to ignore. I structure this as a bull call spread to maintain capital efficiency while strictly defining risk. Entry price is targeted at approximately $250 per spread. If Broadcom simply closes above $350 by the deadline, you’ll make the most money on this trade. Given the active strike and lack of full DMI confirmation, you are entering a limit order that may not be filled immediately. It may take a day or two for prices to reflect, but patience is the key to fighting a prolonged bearish trend. My exact trading settings are: Buy a $345 call, expiring on January 30th Sell a $350 call, expiring on January 30th Number of contracts: 1 Cost: $250 Potential profit: $250 -Nishant Pant Founder: https://tradewithmaya.com/ Author: Mean Reversion Trading Youtube, Twitter: @TheMeanTrader Disclosures: None. All opinions expressed by CNBC Pro contributors are solely their own and do not reflect the opinions of CNBC, NBC UNIVERSAL, its parent or affiliate companies, and may have been previously disseminated on television, radio, the Internet, or another medium. The above is subject to our Terms of Use and Privacy Policy. This content is provided for informational purposes only and does not constitute financial, investment, tax, or legal advice or a recommendation to purchase any securities or other financial assets. The Content is general in nature and does not reflect any individual’s unique personal circumstances. The above may not be appropriate for your particular situation. Before making any financial decisions, you should strongly consider seeking the advice of your own financial or investment advisor. Click here for full disclaimer.
